Is it time to sell the Mag-7 stocks? According to U.S. investment bank Goldman Sachs, investors may want to sell the Magnificent Seven after none of them delivered a positive earnings surprise this reporting season. To be fair, one important company still hasn’t reported its financial results for the final quarter of 2024. Regardless, the firm isn’t broadly optimistic about the stocks.
“This marks the first quarter with no positive sales surprises for the [Magnificent Seven] since 2022.”
– David Kostin, Chief U.S. Equity Strategist at Goldman Sachs.
On that note, Kostin has advised that investors may begin shifting capital to other technology companies, specifically those involved in artificial intelligence (AI).
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For those wondering exactly which artificial intelligence companies to invest in, Kostin suggests allocating capital to “AI Phase 3” companies. These companies have the potential to monetize AI by generating incremental revenues, such as in software and information technology (IT) services.
While choosing AI stocks for investment is important, an even more serious development in the tech world is the ongoing AI Summit in Paris. The summit has launched new partnerships, foundations, and projects as yet, and the BBC has also recently reported on an international agreement on artificial intelligence (AI) at the Summit.
According to the source, the US and the UK have reportedly declined to sign the agreement. While dozens of countries including France, China, and India, have already signed the charter that pledges an “open”, “inclusive” and “ethical” approach to the technology’s development, these two countries have chosen to decline instead.
The UK government has cited concerns about national security and “global governance” as reasons for not signing the agreement. Meanwhile, US Vice President JD Vance told delegates in Paris earlier that too much artificial intelligence (AI) technology regulation could “kill a transformative industry just as it’s taking off”.
According to Vance, AI was “an opportunity that the Trump administration will not squander” and said “pro-growth AI policies” should be prioritized over safety.
On the contrary, French President Emmanuel Macron has defended the need for further regulation.
“We need these rules for AI to move forward”.
-Macron said at the summit.
For those wondering what the agreement stipulates, the statement that 60 countries have signed aims to reduce digital divides by promoting AI accessibility, while ensuring AI development is “transparent”, and “safe” as well as “secure, and trustworthy”.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Photo by Pascal Bernardon on Unsplash
12. Astera Labs, Inc. (NASDAQ:ALAB)
Number of Hedge Fund Holders: 39
Astera Labs, Inc. (NASDAQ:ALAB) is engaged in the design, manufacture, and selling of semiconductor-based connectivity solutions for cloud and AI infrastructure. On February 11, Jefferies analyst Blayne Curtis maintained a “Buy” rating on the stock with a price target of $125.00. Curtis’ buy rating reflects Astera Lab’s strong growth potential. Its strong performance metrics, predominantly with its ASIC ramps that involve major hyperscalers such as Amazon and Google, is evidence of this potential. The company also boasts a robust growth trajectory, which the firm noted is exemplified by expected contributions from Nvidia’s custom Blackwell designs in the latter half of 2025. The firm also highlighted that the company’s revenue from its Aries and Taurus SCMs has significantly exceeded expectations, demonstrating its ability to scale PCIe/Ethernet connectivity for AI configurations. Moreover, a shift towards hardware solutions does raise some concerns over gross margins, but the company’s strategic acquisitions and increased R&D activities outweigh them.
11. monday.com Ltd. (NASDAQ:MNDY)
Number of Hedge Fund Holders: 49
monday.com Ltd. (NASDAQ:MNDY) develops software applications globally, offering a cloud-based Work OS for creating work management tools. On February 10, KeyBanc upgraded the stock to “Overweight” from Sector Weight with a $420 price target. The firm upgraded the project management software company following earnings, admitting that it was wrongly worried about Monday.com’s guidance into the quarter. It now believes that the company outlook is “plenty achievable” with “multiple potential areas of upside.” The firm also highlighted several factors supporting the company’s future growth, including increased sales rep productivity, headcount expansion, new product momentum, refining macroeconomic environment, and artificial intelligence initiatives.
“We are back on the Monday train with an upgrade to Overweight and are reintroducing a price target at $420.”